Goldman’s new partner class shows shrinking role of trading division

An industrywide slump has driven down Goldman Sachs’s trading revenue to $12bn in the first nine months of the year, from $27.5bn in the same period of 2009 and $18.2bn in 2010.

 Bloomberg/New York

  Goldman Sachs Group’s new class of 78 so-called partners spotlights the shrinking role of trading, the growth of other businesses and one area where progress is slow: the addition of women to its highest ranks.

Employees in the trading and research divisions comprise 36% of the class, down from 44% two years ago, according to the New York-based company. An industrywide slump has driven down Goldman Sachs’s trading revenue to $12bn in the first nine months of the year, from $27.5bn in the same period of 2009 and $18.2bn in 2010.

All other divisions had more partners named than they did in 2012, including three more each in investment banking and asset management. Revenue in both of those segments rose more than 35% from the first nine months of 2009.

Goldman Sachs spends months vetting candidates for selection as a partner, a nod to the firm’s 130 years as a private partnership that ended with a 1999 public offering. Partners, also known as participating managing directors, typically receive a $900,000 salary, a cut of a special bonus pool and the opportunity to invest in private funds.

There are 11 women in the new class, or 14% of the total, the same percentage as in 2012, the company said yesterday. That’s consistent with its management committee, where five of the 34 members are female. Last year’s class of managing directors, the title just below partner, was 20% women, down from 23% in 2012.

Goldman Sachs has highlighted the need for women in the workforce through its 10,000 Women philanthropic program that has sought to build on the work of Kathy Matsui, the firm’s chief Japan equity strategist and a partner who coined the term womenomics in 1999.

The percentages at the highest levels trail the firm’s broader population, as 36% of Goldman Sachs’s US workforce is female. Still, it’s an increase from when the bank was a true partnership. After the 1998 class was elected, 6% of the firm’s 246 partners were women.

Goldman Sachs has added senior women from other firms. Of the five bankers it hired as partners since the last class, two are female. The firm added Kate Richdale from Morgan Stanley in 2013 and A J Murphy from Bank of America Corp earlier this year.

Among the smaller group of traders promoted this year, at least three work in areas that make long-term investments using the firm’s own money. That area that has grown as regulations required the bank to scale back its investments in private-equity and hedge funds.

Tavis Cannell and Maxim Klimov have worked in Europe in the special situations group, a unit that invests in a range of assets, from middle-market loans to illiquid debt to equity stakes in private companies. Thomas Tormey is the co-head of Goldman Sachs’s distressed investing unit.

At least four of the investment bankers work with technology firms, including Dan Swift, co-head of technology, media and telecom banking for Asia. At least three were in leveraged finance, including at least two in Europe, where Goldman Sachs has highlighted opportunities to increase financing as European banks pull back.

Also included among the bankers promoted was Umesh Subramanian, the investment banking division’s head of strats, a group with technology and quantitative backgrounds that reports to Chief Information Officer Martin Chavez. David Solomon, co-head of the investment banking unit, said he plans to use technology to boost the division’s pretax margin, which is set to rise for a fourth straight year, Sandler O’Neill & Partners analysts said in a note last week.

The new promotions take effect January 1, and the total number of partners — about 467 — will amount to 1.6% of full-time employees, compared with 1.7% after the last round, according to David Wells, a Goldman Sachs spokesman in New York.

Partners collectively owned about 8.5% of the firm’s stock as of August 13, the lowest since 2010. The stake has dropped from more than 11% at the beginning of the year, largely because they exercised stock options granted in 2008, reaping about $390mn after the share price doubled since the financial crisis.